Dmitri Medvedev's Modernization Thaw: Objectives, Actions, And Policy Tests (Russian Outlook) (Report‪)‬

Atop Moscow financial manager and entrepreneur aptly called the Medvedev campaign "a deficit-driven modernization." (1) Indeed, with oil revenues constituting approximately 45 percent of the Russian state budget, Russia can balance it only if oil prices reach $90 per barrel. (2) The budget deficit is projected, optimistically, to be around 5 percent of GDP in 2010. With economic growth modest at best, the government hopes to keep the deficit down to 3--4 percent with the help of injections from the $450 billion Stabilization Fund, left over from the oil boom. Nobody knows what will happen once this money runs out. After declining by nearly 8 percent last year, (3) Russia's GDP is predicted to grow by 1-2 percent at most for a number of years--or it could stagnate entirely. (4) Even if the World Bank's optimistic GDP growth forecasts of 4.5 percent this year and 4.8 percent in 2011 hold true, the Russian economy will still be incapable of generating the trillions of rubles needed to rebuild its crumbling infrastructure, salvage the collapsing state-pension system at a time of unprecedented population aging, and develop new gas and oil fields to replace the rapidly depleting current ones--to name just some of the biggest and most urgent challenges that now beset Russia after a decade of economic and political Putinism: the Kremlin's unchallenged control over the economy and politics, its drive to dominate the post-Soviet geopolitical space, and its hostility toward the West, especially the United States.